Trump's Official Trade Policy Is to Be As Incoherent As Possible

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It's Tariff Day , the day when President Donald Trump said he would impose severe tariffs on countries that failed to sign trade deals beneficial to the US economy. Whatever one's take on tariffs in general, Trump's specific threats and actions amount to a case study of incoherence—rooted in personal pique, shameless extortion, a dim understanding of global supply chains, and a style of thinking that lacks a strategic dimension.

First there are the inconsistencies. Earlier this week, Trump insisted that the Aug. 1 deadline was inviolable—then, the day before it set in, he allowed Mexico a 90-day extension (repeating the delay he allowed Mexico and Canada just before a similar deadline earlier this year), making the rest of the world wonder just how serious these threats are.

Second, the trade deals reached so far are hardly what they seem . Trump announced, and much of the American media duly reported, that Japan avoided higher tariffs by agreeing to set up a $500 billion investment fund, which Trump would control and of which the US Treasury would share half the profits. Japan's official readout of the deal included no such language, yet the media reports inflamed distrust and debate within Tokyo's parliament, which was already in turmoil after elections returned control of the upper house to the opposition party. Nice way to treat America's major ally in Asia.

Similarly, the European Union reportedly agreed to a deal that would vastly increase purchases of fuel and military hardware from the US Yet initial press reports omitted three vital bits of fine print. First, the specified amount of fuel exceeds European demand; the EU doesn't buy weapons (those purchases are made by individual governments); and the EU's official readout noted, in boldface type, that the deal was “ not legally binding .” In other words, the EU was saying: We'll do, and not do, what we'd like.

Other countries—and, one hopes, the American universities from which Trump has extracted fragments in order to avoid deeper punishment—might glean a lesson here: It's possible to put one over on Trump, as long as it looks like he won the faceoff, even for a little while. Once that first impression is made, he'll lose interest; you can go about your business. As a Japanese official noted, “ If we don't put anything in writing, we don't have to fulfill Trump's demands .”

Third, Trump's main target in all this is China—which truly does have a record of unfair trading policies and should be dealt with in one way or another—but his tendency to view relationships as isolated transactions wrecks what leverage he might have.

For instance, Trump announced today that he was imposing a 40 percent tariff not only on certain goods from China but also on transshipments of goods that go from China through a third country before moving on to the United States—this on top of whatever tariffs might already be leveled against the complicit parties.

Yet, not long after, he assured Philippines president Bongbong Marcos, during his visit to the White House, that he should feel free to have good relations with China because the US has good relations with China as well.

US–China relations are complicated. The two countries have shared interests in some realms, conflicting interests in others. Managing both sets of interests requires a mix of cooperation and confrontation. This is a challenging task. But pounding China with high-pressure economic penalties, while encouraging one of our close Asian allies to do the opposite, is a recipe for confusion and self-defeat.

Fourth, some of the tariffs are weakening the American industries that Trump said (and probably really believed) they would help. US automakers —assumed to be the biggest beneficiaries of tariffs—are in fact hurting, forced to raise prices because they import many of their component parts from China and other countries whose imports are taxed. The same is, or will soon be, true of many US-based electronics firms, which also depend on foreigners for vital parts. Some of these firms—including a small Minnesota loudspeaker company profiled in the New York Times —may relocate, possibly to Canada, in order to avoid paying higher prices for these parts. This—the inexorable result of the vastly entangled global supply chain—is the exact opposite effect that Trump intended.

Finally, those seeking rhyme or reason in Trump's trade policies will be further baffled by the clear fact that much of what he's doing is driven by pure personal spite. He threatened to levy a 50 percent tariff on Brazil unless its government dropped criminal charges against former president Jair Bolsonaro, who was jailed for plotting a coup. Bolsonaro was a friend and ally of Trump's, therefore his arrest and prosecution—in the words of Trump's emergency executive order on the tariff— “threaten the national security, foreign policy, and economy of the United States.”

This is a mix of Don Corleone (“I'll make you an offer you can't refuse”) and King Louis

Brazil's current president, Luiz Inacio Lula da Silva, is openly resisting Trump's pressure . He can do so, in part, because Brazil doesn't depend much on the US for trade. But Trump's vindictive move is not merely ineffective; it's also damaging to US interests. It has boosted Lula's popularity at home and triggered a wave of hostility toward the arrogant giant to the north. And it has opened up a market for China , whose trade officials threw it to Brasilia just hours after Trump published his edict. (Here again is another instance where even an ounce of strategic thinking could have averted a major politico-economic setback.)